March 2016 - RIP Dodd Frank

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SECONDARY
MARKET
THE LATEST THE LATEST
Freddie Mac Reports Another
Profitable Year; Mortgage Markets
Have 'Strong Momentum'
The GSE has returned more than $98
billion in dividends to U.S. Treasury.
T
he FHFA's conser-
vatorship of Fannie
Mae and Freddie Mac
remains a controversial
topic, and lawmakers and other
stakeholders have often ques-
tioned the ability of the GSEs to
remain profitable. In February,
however, Freddie Mac addressed
these concerns full-force—at
least for now—by reporting a
net income of $6.4 billion for
2015 in the enterprise's Q 4 and
full-year 2015 earnings report.
Though 2015's net income
was down 17 percent from the
previous year's net income of
$7.7 billion, 2015 was still Freddie
Mac's fourth consecutive year of
profitability. Freddie Mac's net
income for the fourth quarter of
2015 was $2.2 billion, rebounding
in a big way after reporting a $475
million loss for Q 3.
"2015 marked another year of
solid financial performance for
Freddie Mac—our fourth straight
year of profitability, although
we did experience significant
quarterly market-related earnings
volatility," CEO Donald Layton
said. "Our performance was
driven by our progress in building
a better Freddie Mac, as evidenced
by continued growth in purchase
volumes in the guarantee busi
-
nesses, including a multifamily
record for the company. We're
also building a better housing
finance system by expanding
credit risk transfer and efficiently
disposing of legacy assets, and so
reducing taxpayer exposure to
mortgage risk."
Freddie Mac's net interest in-
come for 2015 was $14.9 billion—
a 5 percent increase from the
previous year—despite mandated
reduction in the GSE's mortgage-
related investments portfolio.
Freddie Mac provided $402 bil
-
lion in liquidity to the mortgage
market in 2015, increasing the
total of liquidity provided up to
$2.9 trillion since 2009 right after
the conservatorship began.
"The mortgage markets have
strong momentum going into 2016,"
Layton said, "and we continue to
focus on serving our customers
better and fulfilling our mission
to support the housing needs of
owners and renters nationwide,
including responsibly expanding
access to mortgage credit."
While concerns remain that
the GSEs will eventually need
another taxpayer-funded bail
-
out, Freddie Mac returned $5.5
billion in dividend payments to
the Treasury in 2015. Though the
yearly dividend payment to the
Treasury declined from $47.6 bil
-
lion in 2013 to $19.6 billion in 2014
and down again to $5.5 billion
in 2015, Freddie Mac has now
returned $98.2 billion in dividend
payments to the Treasury in total,
which is nearly $27 billion more
than the $71.3 billion bailout it re
-
ceived in 2008. The amount paid
to the Treasury includes the Q1
2016 obligation of $1.7 billion.
In 2015, Freddie Mac trans-
ferred a portion of credit risk
on approximately $180 billion
in mortgages—about $30 bil-
lion more than in 2014. The
Legacy Asset portfolio declined
to 16 percent of credit guarantee
portfolio in 2015, compared to
20 percent in 2014. The seri
-
ous delinquency rate on loans
backed by Freddie Mac fell to
1.32 percent as of the end of 2015,
down from 1.88 percent at the
end of the previous year. Freddie
Mac also completed nonperform
-
ing loans sales with an aggregate
unpaid principal balance (UPB)
of approximately $2.9 billion, after
completing sales of loans with
slightly more than $500 million
in UPB the previous year.